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HDFC Securities Retail Research
In last six years, the asset under management of Fusion Micro Finance Ltd. has grown at a compound annual growth rate of 43%, while during the same period it has reported a healthy 28% CAGR in borrowers.
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Overall, FY23 has been a year full of milestones for the company. It has registered a 37% yearly growth in its AUM, reported its highest ever yearly profit after tax of Rs. 387 crores (up 1680% YoY), organically added ~0.8 million customers taking the total to 3.5 million spread across 20 states.
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Over the last four quarters, the company has continuously delivered return on asset above 4% and return on equity above 20% on account of robust margins and declining provisions.
We expect the company to grow its AUM at 26% CAGR while net interest income and net profit are expected to grow at 28% and 31% CAGR respectively over FY23-25E. return on average asset is estimated to improve to 4.9% in FY25E from current 4.6% in FY23.
The asset quality should improve further from here on as collection starts stabilizing. The company is trading at 1.48 times FY25E adjusted book value, which is at a considerable discount to its peers. Looking at the growth opportunities we believe that the discount will gradually narrow.
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